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# 201Lec03 - 201Lec03.PPT The Accounting Information System...

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The Accounting Information System Collects, organizes and processes transaction data Transaction is an event that results in a change of a balance sheet item. Typically it is an exchange. (Asset, liability, stock, revenue or expense for one another.) 201Lec03.PPT 1

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Step 1 : Accumulate facts. Step 2 : Determine effects on accounting equation Note: Algebra requires that you keep the equality! Steps in transaction analysis: Steps in transaction analysis: Steps in transaction analysis: Steps in transaction analysis: 2
Transaction Analysis Transaction Analysis Two or more Two or more items will always be affected Example: (1) Owner invested \$10,000 Cash in exchange for \$10,000 of Common Stock Two or more Two or more items will always be affected Example: (1) Owner invested \$10,000 Cash in exchange for \$10,000 of Common Stock 3

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Example: Example: (2) Borrowed \$5,000 by issuing a bond. (2) Borrowed \$5,000 by issuing a bond. Example: Example: (2) Borrowed \$5,000 by issuing a bond. (2) Borrowed \$5,000 by issuing a bond. (2 ) + \$5,000 + \$5,000 ________ \$15,000 = \$5,000 +\$10,000 Bonds Payable 4 Transaction Analysis Transaction Analysis
TRANSACTION ANALYSIS examples TRANSACTION ANALYSIS examples TRANSACTION ANALYSIS examples TRANSACTION ANALYSIS examples Business buys a computer, paying cash. _________ Increase and _________ Decrease Business provides service to a customer and is paid cash. ________ Increase and _________ Increases Employee works and business pays cash for wages. ________ Decrease and _______ Decreases 5

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TRANSACTION ANALYSIS examples TRANSACTION ANALYSIS examples TRANSACTION ANALYSIS examples TRANSACTION ANALYSIS examples Business applies & gets a corporate credit card account. Business takes out an advertisement that runs today in the newspaper and charges the cost to the credit card. __________ Increase and __________ Decreases Business pays off credit card . _________ Decrease and _________ Decrease 6
TRANSACTION ANALYSIS examples TRANSACTION ANALYSIS examples TRANSACTION ANALYSIS examples TRANSACTION ANALYSIS examples Business provides services to a customer but allows them 30 days to pay. ________ Increase and ________ Increases 30 days later customer pays off amount due in full. _________ Increase and ________ Decrease Business pays cash dividend to Owners. _________ Decrease and ________ Decreases 7

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Lowest level of detail in accounting. Records increases and decreases for a specific Asset , Liability , or Stockholders’ Equity item. Number of accounts used depends on facts and personal desires of the accountant & management.
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